Marac to finance vehicles for Kiwibank

Brian Jolliffe

A partnership between finance company Marac and state-owned Kiwibank will help underpin profitability as the economy softens, says Marac's parent company Pyne Gould Corporation.

Under the deal announced yesterday, Marac will provide Kiwibank with vehicle financing loans via the bank's branch network.

"Kiwibank have identified that we have strong expertise in that area and we will be doing everything associated with those loans for them," said Marac and PGC managing director Brian Jolliffe.

While there had been some questions raised about the overall profitability of Kiwibank's customers, Jolliffe said the car financing Marac provided to them would be under the same criteria as its own car loans business.

"What Kiwibank do for customers that don't meet Marac's criteria is their own decision," he said.

Kiwibank would also refer customers seeking commercial plant and machinery loans to Marac.

Spectacular growth in Marac's plant and machinery finance business over the last year helped offset a softer than expected performance from PGG Wrightson, the recently merged rural services giant in which PGC holds a 22 per cent stake.

PGC yesterday reported a net profit of $66.3 million, up from $30.2 million last year. However excluding one-offs including a $37.3 million gain resulting from the PGG-Wrightson merger, the underlying profit was $29 million, little changed from $28.9 million a year ago.

PGG Wrightson last week reported a net profit of $27 million, $3 million short of forecasts made when the merger was proposed.

PGG Wrightson's contribution to PGC for the year to June 30 was $6.7 million, down from the $9.5 million PGG returned last year.

PGC owns Marac, trustee company Perpetual Trust and a stake in PGG-Wrightson.

Marac's net profit rose 5 per cent to $24.2 million while Perpetual Trust's was up 32 per cent to $3 million.

The biggest area for growth at Marac was its commercial plant and equipment financing arm where receivables increased by 24 per cent to $428 million over the year.

That growth was expected to continue driven by demand from contractors involved in the burgeoning infrastructure construction sector.

"That part of the market is leading to some increasing opportunities for us. Couple that with things like the Kiwibank announcement and our regional expansion and we're seeing commercial continuing to go very well."

Jolliffe said Marac was experiencing no difficulties raising funds from investors despite the negative publicity generated by recent finance company failures.

Marac gained a BBB minus investment grade credit rating from Standard & Poor's in April.

PGC announced a fully imputed final dividend of 11c per share, bringing total dividends for the year to 20cps. Its shares closed 1c higher yesterday at $4.15.